Bear Stearns & Co. burned through almost all of its $ 18 billion cash reserves in the week of 10 March 2008 and an unprecedented provision of liquidity support from the Federal Reserve on Friday 13 March was not sufficient to reverse the decline in the bear state. Federal Reserve Chairman Benjamin Bernanke, Treasury Secretary Henry Paulson and New York Fed President Timothy Geithner were intent on limiting the impact of Bear’s problems on the broader financial system. James “Jamie” Dimon, … Read more »

Bear Stearns & Co. burned through almost all of its $ 18 billion cash reserves in the week of 10 March 2008 and an unprecedented provision of liquidity support from the Federal Reserve on Friday 13 March was not sufficient to reverse the decline in the bear state. Federal Reserve Chairman Benjamin Bernanke, Treasury Secretary Henry Paulson and New York Fed President Timothy Geithner were intent on limiting the impact of Bear’s problems on the broader financial system. James “Jamie” Dimon, Morgan’s chairman and CEO, was in constant contact with the regulator over the weekend of 14 to 16 March negotiating possible scenarios for the rescue of Bear without the bears would be forced to seek bankruptcy protection it when the markets open on Monday. Late Sunday afternoon, 16 March accepted the offer to purchase Bear board Morgan Bear for $ 2 per share, an offer that would have been made without significant state support. There was hope that the Bear rescue would help avert widespread distribution of damage in the larger financial world that many politicians as likely considered to follow the failure of a major investment bank. This case examines a seminal event in the financial and economic crisis that began in the summer of 2007, and provides background information to better understand the full scope of the crisis, as it was revealed in the summer and fall of 2008. It was written by two sets of questions. First, it provides the opportunity to understand the issues of corporate financing of capital and liquidity, and the company valuation. Second, the case allows for the exploration of aspects of a company’s internal and external governance and the challenges of navigating through a crisis when confronted with compelling pressure of competing interest groups.
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from
Daniel B. Bergstresser,
Clayton Rose,
David Lane
Source: Harvard Business School
37 pages.
Release Date: 22 January 2009. Prod #: 309001-PDF-ENG
Tip of the Iceberg: JP Morgan and Bear Stearns (A) HBR case solution